Bombardier Recreational Products, Inc et al v. Arctic Cat, Inc et al

Filing 1027

MEMORANDUM OPINION AND ORDER dismissing with prejudice 29 Defendants' affirmative defense of equitable estoppel contained in Defendants' Tenth Affirmative Defense of Defendants' Answer, Affirmative Defenses and Counterclaims t o Amended Complaint, dismissing with prejudice 29 Defendants' Eleventh and Twelfth Affirmative Defenses of Defendants' Answer, Affirmative Defenses and Counterclaims to Amended Complaint, and denying as moot 1006 Plaintiffs' Motion for Judgment as a Matter of Law. (Written Opinion) Signed by Chief Judge John R. Tunheim on November 20, 2017. (HAZ)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-2706 (JRT/LIB)

BOMBARDIER RECREATIONAL
PRODUCTS, INC., and BRP U.S. INC.,
Plaintiffs,
v.

MEMORANDUM OPINION
AND ORDER ON ARCTIC CAT’S
EQUITABLE DEFENSES

ARCTIC CAT INC., and ARCTIC CAT
SALES INC.,

Defendants.
Harry C. Marcus, LOCKE LORD LLP, Three World Financial Center,
New York, NY 10281, and Kevin D. Conneely and Ruth A. Rivard,
STINSON LEONARD STREET LLP, 50 South Sixth Street, Suite 2600,
Minneapolis, MN 55402, for plaintiffs.
Aaron A. Myers, Diane L. Peterson, and Niall A. MacLeod, KUTAK
ROCK LLP, 60 South Sixth Street, Suite 3400, Minneapolis, MN 55402,
for defendants.
BACKGROUND
Plaintiffs Bombardier Recreational Products, Inc. and BRP U.S. Inc. (collectively
“BRP”) brought this action against Arctic Cat Inc. and Arctic Cat Sales Inc. (collectively
“Arctic Cat”), alleging patent infringement. Arctic Cat asserts four equitable defenses
against BRP: equitable estoppel, laches, waiver, and unclean hands. (Defs.’ Answer,
Affirmative Defenses, and Countercls. to Am. Compl., Defenses to Pls.’ Compl.
(“Answer”) ¶¶ 10-12, Mar. 15, 2012, Docket No. 29.) The Court denied BRP’s motion in
limine to exclude evidence of Arctic Cat’s equitable defenses at trial, but the Court
expressed concern “that Arctic Cat lacks sufficient evidence to support a finding that it
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will prevail on its equitable defenses.” (Mem. Op. & Order at 5, Nov. 11, 2017, Docket
No. 990.) The Court ordered Arctic Cat to submit a proffer showing that it could
“present at trial sufficient evidence to support a finding that one or more of the asserted
claims of the patents-in-suit are unenforceable” due to equitable estoppel, laches, waiver,
or unclean hands.” (Id. at 11; Defs.’ Proffer, Nov. 13, 2017, Docket No. 991.) In
response, BRP filed a motion for judgment as a matter of law dismissing Arctic Cat’s
equitable defenses. (Pls.’ Mot. for J. as a Matter of Law, Nov. 14, 2017, Docket No.
1006.)
Arctic Cat has not shown that it can present sufficient evidence at trial to support a
finding that one or more of the asserted claims of the patents-in-suit are unenforceable
due to equitable estoppel, waiver, or unclean hands. The Court will therefore grant BRP
summary judgment and dismiss those equitable defenses. In the event, however, that
BRP prevails at trial and seeks a permanent injunction, the Court will consider Arctic
Cat’s laches defense then.

DISCUSSION
I.

STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(f) empowers the Court to grant summary

judgment independent of a motion. It provides that “the court may . . . consider summary
judgment on its own after identifying for the parties material facts that may not be
genuinely in dispute.” Fed. R. Civ. P. 56(f). “Federal district courts have power to grant
summary judgment sua sponte when the losing party is given sufficient advance notice
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and an adequate opportunity to submit evidence in opposition.” Barkley, Inc. v. Gabriel
Bros., Inc., 829 F.3d 1030, 1041 (8th Cir. 2016) (quoting Chrysler Credit Corp. v. Cathey,
977 F.2d 447, 449 (8th Cir. 1992) (per curiam)).

I.

EQUITABLE ESTOPPEL
To prove that a patent is unenforceable due to equitable estoppel, an accused

infringer must show (1) misleading conduct, (2) reliance on that conduct, and (3) material
prejudice. A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020, 1028
(Fed. Cir. 1992) (en banc), abrogated on other grounds by SCA Hygiene Prod.
Aktiebolag v. First Quality Baby Prod., LLC, 137 S. Ct. 954, 967 (2017).
Arctic Cat maintains that BRP unreasonably and inexcusably delayed filing this
action for four years, and that BRP never notified Arctic Cat of its infringement. But
silence can only constitute “misleading conduct” when there is an obligation to speak.
Aukerman, 960 F.2d at 1028. Arctic Cat points to a 2003 letter from BRP to Arctic Cat
notifying Arctic Cat of BRP’s pending patent applications, but pre-issuance activity
cannot give rise to equitable estoppel. Radio Sys. Corp. v. Lalor, 709 F.3d 1124, 1131
(Fed. Cir. 2013). Moreover, Arctic Cat has not presented evidence of any reliance on
BRP’s delay – e.g., a change in position that Arctic Cat would not have taken but for
BRP’s delay. An accused infringer’s reliance based on its subjective belief of invalidity
does not suffice for purposes of inequitable conduct. Hall v. Aqua Queen Mfg., Inc., 93
F.3d 1548, 1558 (Fed. Cir. 1996).

The Court will therefore dismiss Arctic Cat’s

equitable-estoppel defense.
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II.

LACHES
Laches no longer bars damages in patent cases. SCA Hygiene, 137 S. Ct. at 967.

Rather, laches may apply to equitable relief only, such as a permanent injunction. See id.
To prove laches, an accused infringer must show (1) unreasonable and inexcusable delay
in filing suit, and (2) that the delay prejudiced the accused infringer. Aukerman, 960 F.2d
at 1032. The Court will permit Arctic Cat to assert its laches defense post-trial if BRP
prevails on the merits and seeks injunctive relief. Moreover, BRP has stated that it will
not object to Arctic Cat arguing “undue-delay-type facts” on any “post-trial injunctive
relief that BRP may ultimately seek.” (Pls.’ Mem. in Supp. of Mot. for J. as a Matter of
Law at 4, Nov. 15, 2017, Docket No. 1008.)

III.

WAIVER
Waiver is a voluntary and intentional relinquishment or abandonment of a known

right. Haghighi v. Russian-Am. Broad. Co., 173 F.3d 1086, 1088 (8th Cir. 1999). Arctic
Cat invokes waiver only to bar BRP from seeking damages for post-model-year 2013
snowmobiles (Defs.’ Proffer at 7-8), which the Court has already held may not be sought
at trial (Mem. Op. & Order at 4-5). Because Arctic Cat does not assert waiver as a
defense to any BRP’s rights that BRP will assert at trial, the Court will dismiss Arctic
Cat’s waiver defense.

But Arctic Cat may argue post-trial that BRP’s right to

supplemental damages has been waived, which is a higher standard than the lack of
diligence that the Court found in denying BRP’s request to amend its infringement
contentions. (See Order at 27-29, Oct. 14, 2017, Docket No. 555.)
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IV.

UNCLEAN HANDS 1
In patent cases, unclean hands applies only in “extreme circumstances.”

Erfindergemeinschaft UroPep GbR v. Eli Lilly & Co., No. 15-1202, 2017 WL 275465, at
*7 (E.D. Tex. Jan. 20, 2017) (Bryson, J.); see Therasense, Inc. v. Becton, Dickinson &
Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011). Such circumstances are those that “shock the
moral sensibilities of the judge” or are “offensive to the dictates of natural justice.” iFLY
Holdings LLC v. Indoor Skydiving Germany GmbH, No. 14-1080, 2016 WL 3675136, at
*1 (E.D. Tex. Mar. 25, 2016). The accused infringer bears the burden of proving unclean
hands by clear and convincing evidence. In re Omeprazole Patent Litig., 483 F.3d 1364,
1374 (Fed. Cir. 2007).
Arctic Cat asserts that BRP has unclean hands because BRP has “engaged in a
course of conduct where it has attempted to . . . patent the prior art, patent subject matter
not eligible for patent protection, fail to name proper inventors where the inventors are
not BRP employees, and make material misrepresentations and omissions to and from the
U.S. Patent Office.” (Proffer at 8.) But the specific factual allegations that Arctic Cat
makes – even assuming that Arctic Cat could prove those facts by clear and convincing
evidence – do not constitute extreme circumstances that would justify prohibiting BRP
from asserting its patent rights for uncleans hands. The Court will therefore dismiss
Arctic Cat’s unclean-hands defense.

1

Counsel for Arctic Cat represented to the Court that Arctic Cat’s unclean-hands defense
did not need to go to the jury for an advisory verdict. The Court is unclear whether counsel’s
statements constituted a voluntary dismissal of its unclean-hands defense.

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ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.

Defendants’ affirmative defense of equitable estoppel contained in

Defendants’ Tenth Affirmative Defense of Defendants’ Answer, Affirmative Defenses
and Counterclaims to Amended Complaint [Docket No. 29] is DISMISSED with
prejudice.
2.

Defendants’ Eleventh and Twelfth Affirmative Defenses of Defendants’

Answer, Affirmative Defenses and Counterclaims to Amended Complaint [Docket No.
29] are DISMISSED with prejudice.
3.

Plaintiffs’ Motion for Judgment as a Matter of Law [Docket No. 1006] is

DENIED as moot.

DATED: November 20, 2017
at Minneapolis, Minnesota.

_________s/John R. Tunheim_________
JOHN R. TUNHEIM
Chief Judge
United States District Court

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